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What Hampers Innovations to Become Industrial Successes in Sweden?

Posted by Editor on Wednesday, 6 December 2017

Sweden is the best country in Europe on innovation and next best in the world after South Korea. This ranking is based on European Innovation Scoreboard and Bloomberg Innovation Index. But are the innovations so pioneering? A lot of new products and services have been launched but most of it came after the introduction of the smartphone. Unfortunately, such innovations are seldom sustainable – the consumer easily finds new apps that catches interest. The consumer is very volatile.

But what hampers innovations in general to become successful products and services which will have a great impact over a long time?

Short-sightedness is one important factor. Long-term and often risky investments are not valued in Swedish companies since they influence the next and following quarterly reports, which in turn can have an impact on the company management´s incentive program. Management´s income based on bonus has a strong impact on not investing in long-term and risky projects. Such projects are left to others with the result that the company’s future will be impoverished.
The companies will not gain from having such high demands. Investments will not be done and it must be up the owners to change the focus to include projects that will lead to renewal. It is seldom that a company incentive program includes goals for research and innovation.

The time cycle for innovations is not in tune with the industry financial cycle or the political power cycle. Innovation projects are by definition risky and require special personal skills to bridge problems and find ways by experimenting with new solutions. Income from innovations will seldom come where it is expected. It may take several years until a project generates income at all.

Legislators are unable to let things alone. There is an eagerness to create reports from the industry mainly due to the fear of financial crises. Also reporting regarding gender equality – of course important – but all demands for reports take time and energy and contribute to less focus on innovation. As an example, GDPR (General Data Protection Regulation) is probably a regulation that will give all companies in Europe headaches and a lot of internal work which also may cause organizational changes.

Capital is inexpensive and agile. Big corporations can easily invest in safe projects with a marginal return. It can also be tempting to buy start-ups instead of as before work with a long-term horizon in R&D departments. However, integrating results from start-ups is not straightforward.

People have a lot of ideas and many make big efforts creating projects and companies to realize them in order to get rich. But the goal is seldom to build up a future big company but be acquired by an international actor. This situation is quite different to the window 1864-1914 which was the time for industrial development in Sweden. If you had an idea at that time you simply had to start a company if you wanted to develop your idea. There were no companies you could go to with your idea to get it realized. You had to do it yourself. Today it is different. You do not need to create a big company – a start-up is enough and on the international scene, there are lots of possibilities to find actors that are interested to buy your start-up. At least if your idea is a bit unique.

When the smartphone came, it created a lot of interest to make apps for different purposes. It was easy because along with the smartphone there was a business solution. Today we are on the verge of a new software “revolution” – Artificial Intelligence (AI). There are many believers in this technology and of course, there are many clear possibilities in industry and transport but probably less in creative areas. An area where AI, big data, and machine learning can be useful at an early stage is marketing and sales department’s possibilities to get new insights about markets, customers, and competitors activities. AI is however sensitive to data accurateness. Data have to be correct and probably also certified to be useful. In reality, data may not at all be accurate. Fake news and data are easy to produce by an actor interested to throw gravel into to machinery.

It is often argued that Sweden has a lot of skilled people. Probably true, but at least in the IT area, there is a big gap between the number of available IT specialists and what industry needs. Unfortunately, Swedish authorities are about to export a lot of immigrants with IT competence due to sometimes minor mistakes made at an early stage by business to fulfill Swedish immigration rules. Unfortunately, the politicians do not seem to bother very much but have another focus – to integrate immigrants with low education and create jobs requiring very little skills. Of course, it is important to get immigrants with low skills into work. But this will definitely not help Sweden to develop new big companies.

Parts of this article has been inspired by articles by Professor Karl Wennberg at Linköping University and Thomas Franzén, artist, economist and economic debater.

What can be done?

To drive innovation Sweden would need a national project area and here are a few examples:

Looking 30 years back there have been two major technology leaps. One is mobile communication, where Sweden has had a leading role. The other is Internet powered by California, USA. The two areas have now converged.

The next technological leap is Artificial Intelligence (AI) which has obtained significant attention. AI is a technology expected to grow into almost every working field with the potential to be quite destructive regarding how many workers will be needed in the future. Of course, AI has many positive and constructive sides. Researchers in Sweden have not taken the opportunity to develop AI and be in parity with other countries. If Sweden builds on its strong sides e.g. mobile and gaming it may be possible to develop something in the forefront. But it will require mobilization and hopefully create innovations.

Mobile communication and Internet are areas which are very sensitive to security threats. It is not difficult to raise a number of security threats. A few are mentioned below

Potentially all IOT stuff can be overtaken. IOT have generally not been designed with security in mind and adding it afterward will not be enough.

Almost immediately after a new gadget with Internet access is on the market it is hacked and shown to be vulnerable.

The cloud. Many cloud suppliers are far from using technology that was originally meant in a cloud – seamless growth for example. And how can one be sure that security is solved as promised in the advertisements?

Specifications for large IT systems are often not too good to cover for security incidents. Almost daily we hear about large IT systems breaking down. IT systems for hospitals and transport are a few recent examples.

IT systems are “easy to be accessed” by sophisticated hackers.

A national project in Sweden focusing on security in the broad sense would probably create innovations and a more secure society.